We are reposting a blog made by our upcoming ranching for profit workshop instructor, Dave Pratt. The original can be seen here: http://blog.ranchmanagement.com/measuring-production-efficiency/
Dave will be teaching 3 sessions in Malta on June 23rd. Check out our upcoming events page for more info.
Pounds per Head or Pounds per Acre: Two side of the Same Paradigm
For decades we’ve been encouraged to evaluate the efficiency of production by focusing on weight weaned per cow. Now some are arguing that the critical measure should really be pounds weaned per acre. But neither measure is very useful. Each is just a different side of the same failed paradigm: increasing production will increase profit. The problem is, whether it is pounds per cow or pounds per acre, increasing production does not necessarily increase profit. The most productive ranch is rarely the most profitable.
A few years ago, in the development of RFP Next Steps, our program to help our graduates apply Ranching For Profit School principles to their ranches, we took a deep dive into this question: If there is only one thing you can measure to determine the efficiency of production, what should it be?
We looked at every possibility. We found that, if your goal is increasing profit, the best measure of production efficiency is gross margin per unit.